Kinder Morgan at NAPTP Conference: Merging MLPs Possible

By Dimitra DeFotis

Credit: Anglo American

Kinder Morgan, the largest pipeline operator and third largest energy company in North America, said it might eventually simplify its rather complex gaggle of companies including master limited partnerships.

But that’s in the future and in the hands of multiple voting stakeholders, CFO Kimberly A. Dang told an audience gathered at the National Association of Publicly Traded Partnerships annual conference, which wraps up this afternoon.

Kinder Morgan is essentially four enterprises in one: Kinder Morgan (KMI), is the general partner and owns stakes in three other names. It pays a 3.8% yield. Kinder Morgan Energy Partners (KMP), a pipeline MLP, pays a 5.9% yield, in the form of a cash distribution like most MLPs. Kinder Morgan Management (KMR) pays distributions in shares, but still offers tax deferrals. And, following an acquisition, Kinder also controls El Paso Pipeline Partners (EPB), whose yield is 5.7%.

When asked if EPB and KMP could be combined, Dang said,

“We like having the two MLPs out there to accelerate dropdowns.” She said that dropdowns — moving assets into the MLP structure — will wrap up next year, and it would have to make “economic sense to combine those two. The independent boards have to decide and limited partners must vote. If the economics don’t work and it is not good for everyone, we have no issue running two MLPs. There is not a huge administrative burden in doing that.”

Amey Stone is Barron’s Income Investing blogger and Current Yield columnist. She was formerly a managing editor at CBS MoneyWatch, MSN Money and AOL DailyFinance. Her responsibilities included overseeing market coverage and personal finance topics. Prior to those roles, she was a senior writer at BusinessWeek where she authored the Street Wise column online and contributed to the magazine’s Inside Wall Street column. Topics covered included economics, corporate finance, Fed policy, municipal bonds, mutual funds and dividend investing. She co-authored King of Capital, a biography of Citigroup Chairman Sandy Weill. She is a graduate of Yale University and Columbia University’s Graduate School of Journalism.